The world is undeniably becoming more digital. And as things like advertising, commerce, and payments move to digital channels, investors have an opportunity to buy into these wealth-creating trends.

In fact, the stock in companies like MercadoLibre (NASDAQ:MELI) and Pinterest (NYSE:PINS) have already been great investments, with prices surging 210% and 215%, respectively, in the past three years. But these two supercharged growth stocks have plenty of room to run. Here's why.

Investor analyzing financial data.

Image source: Getty Images.

1. MercadoLibre

MercadoLibre operates the largest digital payments and e-commerce platform in Latin America. Not only that, but it also provides advertising, financing, and logistics support to sellers, creating an end-to-end commerce ecosystem. This approach has helped MercadoLibre build a strong moat around its business.

First, the company benefits from high switching costs. In other words, its ecosystem creates so much value for sellers that it's difficult to find a better solution. Case in point: MercadoLibre's marketplace receives nearly four times as many monthly visitors as the next closest competitor in the region, which happens to be Amazon.

If you were a merchant, which platform would you choose? Unless you wanted to make things difficult, you'd probably pick the marketplace that received more visitors.

And that forms the basis of MercadoLibre's other competitive advantage. The company also benefits from a network effect. As more merchants list products on the marketplace, consumers benefit from greater selection; and as more consumers shop on MercadoLibre, merchants benefit from a wider range of potential buyers.

This same dynamic applies to MercadoLibre's digital wallet, and in both cases, it has been a powerful growth driver.

Metric

Q1 2018 (TTM)

Q1 2021 (TTM)

CAGR

Revenue

$1.3 billion

$4.7 billion

55%

Free cash flow

$42.1 million

$682.9 million

153%

Data source: Ycharts. TTM = trailing-12-months. CAGR = compound annual growth rate.

Looking ahead, MercadoLibre is well-positioned to maintain this momentum. Latin America is one of the fastest-growing regions in the world in terms of internet penetration and gross domestic product (GDP). The Latin American economy is getting stronger, and more people are gaining access to e-commerce and digital payments.

As those trends play out, MercadoLibre's strong competitive position should make it a natural choice for both buyers and sellers, helping it capture market share in the coming years. That's why this growth stock looks like a smart investment.

Young woman making an online purchase.

Image source: Getty Images.

2. Pinterest

Pinterest is the social platform for inspiration. It's where users go to get ideas or plan projects, often before they've made any purchases. That makes Pinterest valuable to marketers, as they have a chance to influence consumers early on in their decision-making process. In that way, the relevant ads Pinterest delivers to its users are actually helpful rather than annoying.

Pinterest also has another advantage from a marketing perspective. Since users turn to the social platform for inspiration, Pinterest has lots of data about what users aspire to do. That could be anything from a home renovation or road trip to a new recipe or workout routine. Regardless, by aggregating all of that search data, Pinterest can predict which of today's new ideas today will be "trending" topics tomorrow.

In fact, 80% of Pinterest's predictions for 2020 came true. That type of predictive insight helps marketers tweak content to make it more relatable to consumers. Not surprisingly, this has made Pinterest's platform an increasingly valuable marketing tool for brands, as evidenced by the company's strong top-line growth.

Metric

Q1 2018 (TTM)

Q1 2021 (TTM)

CAGR

Monthly active users

239 million

478 million

26%

Revenue

$521.0 million

$1.9 billion

54%

Data source: Pinterest SEC filings. TTM = trailing-12-months. CAGR = compound annual growth.

To drive consumer adoption, Pinterest has focused on making its platform more shoppable. For instance, users can now shop directly from search, or by selecting "shop similar" on any post. In other words, if you find something you like on the platform, Pinterest can probably connect you with the seller, making it easier than ever to move from inspiration to action.

The company also launched the verified merchant program last year, helping consumers identify sellers that provide high-quality customer service. And all of these efforts are paying off. Over the last 12 months, Pinterest saw a 20-fold increase in the number of product searches, and user engagement with shoppable content skyrocketed 200%.

Looking ahead, these efforts should help Pinterest maintain its strong user growth, which should naturally bring more brands and content to its platform. And as that flywheel spins, Pinterest should capture more digital ad spend, a market that's expected to hit $455 billion in 2021, according to eMarketer.

That's why this growth stock looks a good long-term investment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.